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Government funding bill postpones some health care taxes

In addition to keeping the federal government funded through Feb. 8, the continuing resolution (CR) bill, H.R. 195, which was signed by President Donald Trump on Monday night, contains three tax-related provisions. H.R. 195 further postponed the so-called Cadillac tax and the medical device tax and suspended the tax on health insurance companies for one year. All of these taxes were originally enacted as part of the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148.

The Sec. 4980I 40% excise tax on certain high-cost employer health plans, popularly called the Cadillac tax, had already been delayed to 2020 by the Consolidated Appropriations Act, 2016, P.L. 114-113. The funding bill extends the moratorium for two more years until 2022 (H.R. 195 §4002, amending PPACA §9001(c)).

The medical device excise tax in Sec. 4191 was also enacted as part of PPACA. It was originally suspended for sales in 2016 and 2017 by the Consolidated Appropriations Act, 2016. That suspension expired Dec. 31, 2017. The continuing resolution extends the suspension through Dec. 31, 2019, with an effective date of Dec. 31, 2017 (H.R. 195 §4001, amending Sec. 4191(c)).

Finally, the health insurance tax, an annual fee on health insurance providers contained in Section 9010 of PPACA will be suspended for one year only, for 2019. That means the tax is in effect this year and, if no other legislation is enacted changing the effective date, will be in effect again in 2020 (H.R. 195 §4003, amending PPACA §9010).

The Congressional Budget Office estimates that the suspension and postponement of these taxes will lower federal revenues by $33.2 billion over 10 years.

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The package includes final regulations, guidance on how to calculate W-2 wages, a safe-harbor rule for rental real estate businesses, and new proposed rules on the treatment of previously suspended losses.

Don’t get lost in the fog of legislative changes, developing tax issues, and newly evolving tax planning strategies. Tax Section membership will help you stay up to date and make your practice more efficient.